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How NPP will change the way we do business

Imagine being able to make real-time data rich payments easily and quickly, any time, any place. This is the future with NPP in Australia.

"Imagine being able to make real-time data rich payments easily and quickly, any time, any place; this is the future with NPP in Australia."
Richard Haigh, Head of Australia Payments and Cash Management Products, Transaction Banking at ANZ

The arrival of the real-time New Payments Platform (NPP) in 2017 is set to revolutionise the payments landscape. Instead of waiting hours for a transfer or several days for a cheque to clear, Australians could be paid in a matter of seconds, 24 hours a day, seven days a week, 365 days a year.

The implications are significant for working capital, consumer peer-to-peer payments and future innovation in the payments sector.

Using NPP, selling a second-hand car may no longer be fraught with the trust question of handing over the keys before receiving the money. With a real-time payment infrastructure underpinning mobile transactions, the car dealer will be able to receive the money from the buyer via a funds transfer to their account. Moments later, they could check their account, via a mobile phone to verify receipt of the money, and hand over the keys.

IMPLICATIONS FOR BUSINESS

So what value-add will payments processed in a matter of seconds provide to businesses? What are the benefits of having real time access, enhanced data and new addressing capabilities?

For businesses with large working-capital cycles and funding exposures, NPP will offer enhanced efficiencies and create the potential to slow down payments to debtors until the very end of the invoice cycle, allowing companies to utilise funds more effectively.

On the receivables side of a transaction, the increased data sending capabilities NPP offers will facilitate improved reconciliation and payment visibility.

Moreover,  with NPP based on a global industry standard message format, the possibilities on the receivables side start to grow, as businesses start to get a much better understanding of their payer behaviours; for example, the ability to send more information with each payment.

For parts of the financial services sector NPP will prove game changing. Imagine an insurance company that receives a claim from an individual and needs to make an urgent payment out. With almost immediate crediting of funds, NPP could streamline and expedite the payment process for both the insurer and claimant. 

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Although Australia won’t be the first country globally to have real-time payments capability, NPP is shaping up to have a level of capability and flexibility comparable to, or in advance of, other ‘real-time’ systems available globally.

Some countries, for example Mexico and Sweden, created their real-time payment capabilities by upgrading existing high value or low value systems.

NPP is expected to leap frog over many existing global real-time systems by building a brand new infrastructure for real time payments.

GREATER VOLUME

The payment volumes processed through these real-time systems is impressive. Between November 2014 and November 2015, Faster Payments in the UK processed 1.2 billion payments valued at over £1trillion.

In Singapore, faster payments are working extremely well.  Launched in March 2014, FAST (Fast and Secure Transfers) was launched in response to business and consumer demand for faster, more efficient payments. ANZ is one of the 19 participating banks in the scheme. 

My colleague, Balaji Natarajan, head of Asia Cash Capabilities & Client Solutions, Transactional Banking, says the FAST payment has been progressively increasing the transaction value thresholds and is showing great potential.

He reports in the first two days it went live, the system processed $US64 billion in value and over 33,000 transactions. There has been steady increase in its usage since, with over 18 million transactions processed since launch and faster payments is on the way to becoming the preferred payment method for customers.

WHAT IS NPP?

NPP is the banking industry’s response to the Reserve Bank of Australia’s innovation review, marking a milestone in the ongoing evolution of the payments industry.  The target capability NPP is building towards includes:

• delivering real-time payments;

• making and receiving low-value payments outside standard banking hours (24x7x365);

• sending more complete remittance information with payments; and

• new options for addressing payments.

With an expected rollout date in late 2017, NPP is expected to facilitate the receipt of payments anytime, anyplace, 24x7. So, whether a payment is made at 3am, on a weekend or a public holiday, it will make no difference for the customer, regardless of whom the payer and payee banks with.

Potential business payment scenarios

NPP will help in the facilitation of:

  • Government welfare payments;
  • Property settlements;
  • Emergency government payments;
  • Dividend or rebate payments; and
  • Retailers paying out for faulty goods.

Now, the cumbersome way to make payments using a BSB (branch code) and account number is no longer the only way to address payments.

The NPP is also planning to provide the capability for customers to address payments to mobile phone numbers, email addresses and Australian Business Numbers (ABNs).

This doesn’t mean BSB and account number will be done away with, but rather NPP is planning to facilitate a linkage to these via a new payment addressing capability.

But faster payments are just the beginning. There are already discussions underway about the capability to send a request for payment and the ability to send attachments with payments (like an invoice) to provide extra information for the beneficiary, making the process of payments even more seamless.

OPPORTUNITIES

With a currently planned launch date in late 2017, the benefits and opportunities NPP can deliver may seem worlds away but businesses should already be planning how they can take advantage of the services it will deliver.

The impact of NPP will be far-reaching across an organisation’s value chain internally and quite possibly to its own customers and suppliers.

A considered view of the possibilities NPP could offer might be an investment very much worth making now.

Richard Haigh, Head of Australia Payments and Cash Management Products, Transaction Banking at ANZ

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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